While Old Mutual has seen an increase in “excess death claims” due to Covid-19, stock market gains have bolstered its investment business.     
Its “results from operations” – an indicator of profit – rose by 48% to R1.8 billion in the three months to end-March, the company said in a trading update on Friday.
A strong performance in local equity markets helped to bolster the investment fees it earned on the assets it managed, which were 23% higher than a year before at end-March.
This helped to counter an increase in “excess death claims” due to Covid-19, with approximately R2.7 billion of Covid-19-related mortality claims recorded in the first quarter.
It set aside a “pandemic reserve” of some R4 billion to offset the excess death experience to date. “Taking into account the release of the provision, there is approximately R1.3 billion of the pandemic reserve remaining for mortality risk related to Covid-19. We continue to closely monitor our claims experience as future waves and their impacts remain uncertain.”
But the company added that “persistency” – an indicator of how many of its policies were still active –  was stronger than expected at the end of 2020.
It also reported “strong momentum” in the sale of life insurance policies in March, which has continued into April. But sales have not yet recovered to 2019 levels, the company added. In lockdown, brokers were restricted in their direct contact with clients, but there has been an improvement of late.
Looking ahead, the company said that the increase in its investment under managed provides a strong asset base on which to earn fees in the second quarter.
“Customer retention has been better than expected although policy lapses in future months remain dependent on the pace of economic recovery. Uncertainty over the vaccine rollout and potential third and subsequent waves could place pressure on earnings in the short term.”

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